Phipps Family’s Plan Breeds Success

Image

Orb, with the training rider Jennifer Patterson, after a session in preparation for Saturday’s Preakness Stakes. Earlier this month, Orb gave the Phipps family its first Kentucky Derby victory.CreditCreditJonathan Ernst/Reuters

The Phipps family stable is half the size that it once was but still spends more than $4 million annually maintaining a band of mares, raising their foals into racehorses and paying exorbitant fees for the mares to couple with the finest stallions. Over nearly a century, the family has invested hundreds of millions of dollars in the horse business.

It may be a family pastime, but it is also a business — an expensive one. And the Phippses, whose ancestors were attached to the Carnegie Steel empire, have used savvy methods in improving their horse racing stock. Their business plan has focused on improving the stable’s female bloodlines, making them ever more valuable, rather than simply throwing large sums of money at auctions for promising sires.

Those methods helped produce Orb, the Kentucky Derby winner, who will go for the second leg of the Triple Crown on Saturday in the Preakness Stakes.

Five years ago, the Phipps brain trust met in Saratoga Springs, N.Y., at the family’s house on Broadway, as it has for nearly a century, to decide how to apply the family’s ample resources to building a better racehorse. Each member of the group proposed stallions to mate with the family’s 25 mares. It was time to argue bloodlines, cross-pedigrees, physical characteristics — the breeding knowledge amassed over four generations in a pursuit that is more art than science.

There were differing opinions on a mare named Lady Liberty. She had produced a couple of lackluster foals, and Ogden Mills Phipps, the family patriarch, who is known as Dinny, wanted to sell her. Others disagreed, and prevailed. The mare was paired with a stallion named Malibu Moon.

On the first Saturday in May, the son of that mating, a colt named Orb, gave the Phipps family its first Kentucky Derby victory and reminded the sporting world of a sepia-toned era in which old-money families with names like Whitney and Mellon and Vanderbilt ran horse racing like a private club, on handshakes and coin tosses.

Orb is a seventh-generation descendant of a mare named Erin, who was bought by Gladys Phipps shortly after she got the family into the horse business in 1926.

The Phippses are survivors of racing’s golden age, one of the few old families that were able to successfully hand down their love of horses as well as a blueprint that requires money and rewards patience.

Video

After impressively winning the Kentucky Derby, Orb tried to become the first horse to conquer the Triple Crown in 35 years.

“We are about the fillies: they provide consistency over generations,” Dinny Phipps said.

The goal has always been to make money, and to do so, the family operates with the same discipline it employs at Bessemer Trust, a company established with the family’s original United States Steel fortune that now manages more than $88 billion for some of the world’s wealthiest people. Steely eyes remain fixed on the bottom line.

The foundation of the family’s breeding and racing operation is cultivating the best broodmare bloodlines in the world. In the late 1960s, for example, the family bought a mare named Dorine who had been a multiple stakes winner in Argentina. She became the grandmother of the undefeated Personal Ensign, who memorably caught the Kentucky Derby-winning filly Winning Colors at the wire of the 1988 Breeders’ Cup Distaff in her 13th, and final, race.

Personal Ensign in turn begot the filly My Flag, who won five stakes races, including the 1995 Breeders’ Cup Juvenile Fillies. My Flag then passed on her talent to her daughter Storm Flag Flying, who also won the Breeders’ Cup fillies race and was named the 2-year-old filly champion in 2002.

Sid Fernando, a pedigree consultant, said time and money had created an ideal environment to produce runners. The Phippses know the characteristics of the mares and their runners through the generations and have the room for trial and error. But Fernando said the Phippses had demonstrated a gift as breeders in much the same way that painters and musicians do.

“There is a lot of statistical data out there, but it has to be used in an artistic way,” said Fernando, the president of Werk Thoroughbred Consultants Inc. “Just like painting or music, to stay current in breeding, you have to be constantly dipping back and learning and relearning but ultimately relying on your intuition. They have the type of mares everyone wants, and it’s not an accident.”

This talent and the exacting standards have been passed from generation to generation. In the 1940s, when Dinny Phipps was too young to be legally allowed on the racetrack, his father, Ogden, got him a seat on the starting gate at Saratoga every afternoon the family had a horse running. Dinny’s daughter, Daisy, was a teenager nearly 40 years later when she saw Alysheba, the 1987 Derby and Preakness winner, in the paddock of the same racetrack and fell hard for the sport.

“We breed to race, not to sell, and we are trying to win the best races in America in the right way,” Daisy Phipps said.

What that means is allowing a horse to develop on its own schedule rather than pushing it into the Derby and the other Triple Crown races. It is the reason that over 87 years in the sport, the family has saddled only 11 Derby starters: Orb was the stable’s first since Easy Goer finished second to Sunday Silence in 1989.

“We don’t come unless we believe we can win,” Daisy Phipps said. “It doesn’t do us, or the horse, any good to finish ninth.”

It also means choosing the long road over a quick hit. The Phippses do not buy at auctions where unraced yearlings or 2-year-olds can fetch millions of dollars. They do not chase the so-called home run colt, a horse who auction buyers believe will have a successful racing career and then a lucrative life in the breeding shed.

In Orb, however, the Phippses have indeed bred and built a home run colt of their own. They did it before with Bold Ruler in the 1950s, Buckpasser in the 1960s and Seeking the Gold in the 1980s — each became a prominent stallion who not only added value to the family bloodlines, but also generated cash for the horse business.

As a well-bred Kentucky Derby champion, Orb is worth $15 million as a stallion prospect, according to bloodstock agents, and his value could triple if he captures the Preakness and Belmont Stakes and becomes the first Triple Crown winner since Affirmed in 1978. Unlike horse owners who sell stallion rights for an immediate return on their investment, the Phippses could stand Orb themselves at Claiborne Farm in Kentucky, where the family’s broodmares reside.

Last year’s Belmont Stakes winner, Union Rags, for example, brings in $30,000 per mating and will conservatively see 100 mares per year, for an annual revenue of $3 million. Those numbers will go up or down depending on how his offspring perform once they hit the racetrack in 2016.

“Orb will be $75,000 or $100,000 right off the bat,” said John Sparkman, a pedigree analyst and the author of “Foundation Mares: How Outstanding Female Families Shaped America’s Breeding Industry.”

That means the Phipps family could reap as much as $40 million in stud fees over the next four years, minus its fees to Claiborne for Orb’s care and breeding costs. Or the family could hedge and sell a portion of Orb, as it did recently with the colt Point of Entry. Frank Stronach, a breeder and racetrack operator, paid $4.5 million for a half-interest in that horse, who will retire at the end of this year to the farm Adena Springs.

Dinny Phipps said Orb’s future had yet to be discussed. But hard decisions are as much a part of the stable’s legacy as its traditional black silks and cherry jockey cap, which have long been a fixture at America’s biggest races. In 1936, Gladys Mills Phipps sold an underperforming 3-year-old who became a Depression-era hero. His name? Seabiscuit.

In 1969, the family won a coin toss with Penny Chenery but chose to wait a year for a son or daughter of its Bold Ruler. Who did the family pass up? Secretariat, the 1973 Triple Crown champion.

In 2007, the Phipps family sold the mare Supercharger for $160,000. She was in foal at the time, and three years later, that colt, Super Saver, won the 2010 Derby.

Still, the Phipps family aggressively thins its herd each year. Most of its sales are private, and they are often to other prominent breeders. Title Seeker, for example, an unraced daughter of Personal Ensign, was bought by the billionaire geologist and breeder Charles Fipke for $1.7 million.

“The cost of this has been phenomenal, and in order to have success, we have needed to run things properly with the idea of making money,” Dinny Phipps said. “We put it back into things that are good. It’s why we’re ahead of the game.”